Saturday, October 30, 2010

Google Encounters Resistance (Charts) *Continues below January 4, 2010 YTD high of $626.75* GOOG


Google reported excellent Q3 financial results on October 14
Google is one of the top global brands

Google Overview

GOOG Google was up slightly this past week to close at $613.70 on Friday, October 29, 2010. Google was up +0.19% for the week, finished up a strong +16.70% in October, and is now only down -1.01% for the year. GOOG is up a market-beating +110.97% since the March 9, 2009 market bottom. This equates to a gain of +$1.17 for the week, up +$87.91 for October, down -$6.28 for the year, and up an incredible +$322.81 since the March 9, 2009 market bottom. GOOG is down -2.08% or -$13.05 from the 2010 YTD high of $626.75 on January 4. GOOG has now stayed above the leveling off 200 day simple moving average for 26 consecutive trading days.  After struggling in the Bear Abyss below $500, GOOG has been above $500 for 30 consecutive trading days and has now been above $600 for 11 consecutive trading days.

S&P 500 By comparison, the overall market, the S&P 500, was up +0.02% for the week, up +3.69% for October, up +6.11% for the year, and up +74.90% since the March 9, 2009 market bottom. SPX is down -2.79% from the April 23, 2010 YTD closing high of 1217.28. GOOG has been outperforming the market since the March 9, 2009 market bottom, underperforming for 2010, and outperforming in September and October. A review of the S&P 500 (S&P 500 Rally at Resistance (Charts) *Weekly gain just +0.18, +0.02%*) *Bulls rally 3 straight weeks, 7 of last 8*) is here.

Death Crosses and Reversal A third Death Cross occurred on June 4, the 100 day simple moving average crossed below the 200 day simple moving average. This is the only Death Cross still in effect. Previously, the 50 day simple moving average crossed below the 200 day simple moving average - the Death Cross or Black Cross, on May 25. Earlier, the 50d sma had crossed below the 100d sma on March 4. However, the 50d sma regained the 100d sma, on September 27 and has now regained the 200d sma on October 28, negating these 2 Death Crosses.

Google News and Fundamentals Google reported excellent Q3 earnings which are reviewed and analyzed on this blog. Current Google financial data, charts, and review is at the Google Financial Performance page, updated for the latest Q3 financial results reported on October 14. A review and analysis of the most recent Q3 earnings call is at the Google Earnings Conference Call page. Our valuation and target price of GOOG stock is posted at the Google Stock Valuation page. Revenues from outside of the United States were 52% of total revenues in the third quarter of 2010.

Economic and Market News Information about the USA and world economies is posted at Boom Doom Economy and Financial Controls.

Google Encounters Resistance

Google Daily Chart Below is the GOOG daily chart since October 14, when Google reported calendar Q3 earnings after market close and gapped up the next day. This it to illustrate the just the applicable price interactions with the current close, resistance, and support. GOOG has been testing resistance from October 2010, late 2009, and early 2010. A monthly chart is included at the bottom of this page for a broader perspective.

Noteworthy Closing Prices on Daily Chart Below
Current Close: $613.70
2010 YTD High, January 4: $626.75
2010 YTD Low, July 6: $436.07
YE December 31, 2009: $619.98

* The 50, 100, and 200 day simple moving averages and the uptrend line are not shown on the daily chart this week The lowest yellow line appears horizontal but is actually the downtrend line discussed below *

Intermediate-Term Trend The intermediate-term signal, the comparison of the 25 day and 50 day simple moving averages, generated a buy signal on Thursday, September 30. That is, the 25d sma is greater than the 50d sma. However, the relationship between these two moving averages is a lagging indicator and finally caught up with GOOG's strong September Bull Run +16.8%) that continued into October (+16.7%).

Resistance Because GOOG is below the 2010 YTD high set in January, there are multiples levels of resistance above. Google is at strong resistance and further gains may be hard won. Buyer conviction  for a higher price is questionable. The momentum from the excellent Q3 earnings report has played out and taken GOOG upwards to this price. GOOG is currently in a consolidation and distribution pattern for the past 9 trading days. Current resistance continues to be the 618.00 area, especially the October 18 peak and close of 617.71 (the highest yellow horizontal line on the daily chart above), although GOOG barely closed above on October  26 and 28 only to drop back below the next day.

Next significant resistance above is the peaking action from the December 28-31, 2009 closings of 622.87, 619.40, 622.73, and 619.98, respectively. Ultimately resistance is the January 4, 2010 YTD closing high of 626.75.

Support Because GOOG is above the YTD lows and summer trading range, there are multiple levels of support below. Current support are the recent closings of 607.98 on October 20 (the middle yellow horizontal line on the daily chart above) and 607.83 on October 19. Next support is the January 8 close of 602.02 and then the psychological and benchmark price of 600.00. Further below is significant support at the  the closing sub-peak, on April 15, of 595.30 (the lowest yellow horizontal line on the daily chart above).

Moving Averages GOOG continues well above all the daily simple moving averages: the 25, 50, 100, and 200 (only the 25d is shown on the daily chart above). The 25d sma continues ascending sharply and is above the 50d, 100d, and 200d sma's. The 50d bottomed on September 8, is now ascending sharply, regained the 100d sma on September 27, and now has regained the 200d sma on Thursday, October 28. The 100d is ascending, but is below the 200d. The 200d has been descending but is now leveling off.

Uptrend Line (Not shown on the daily chart this week) The yellow uptrend line, a rate of price ascent, is from the November 24, 2008 closing low of 257.44 up through the July 6, 2010 YTD closing low of 436.07. GOOG broke down through this trendline on August 30 and 31, but bounced above on September 1 and has remained above since.

Downtrend Line The yellow downtrend line, a rate of price descent, is from approximately the November 6, 2007 all-time closing high of 741.79 down through the January 4, 2010 high of 626.75, the peak YTD closing high so far. GOOG gapped up on October 15 to regain downtrend line for the first time since the YTD high on January 4 and has remained above for 11 consecutive trading days.

Relative Strength Index (RSI) The RSI 14 day = 83.01 continues overbought, even with the recent sideways trading. The recent low was 17.01 on August 24 and the unbelievable low of 4.79 on July 6. A 2010 YTD high, and multi-year high, of 94.12 was reached on September 27. The RSI 28 day = 78.25 is overbought, even with the recent sideways trading. The 2010 and multi-year high was 87.87 on October 18. The 2010 lows have been in the mid-20s. The RSIs have been pulled upwards by the September and October rally, spiked up on the October 15 gap up, and are now decreasing some with the recent sideways trading..

MACD (12,26,9) The MACD = +1.04, spiked upwards with the October 15 gap up, and has now downtrended for 8 consecutive trading days as a result of the sideways trading. The 2010 and multi-year high was +7.27 on October 19. The 2010 and multi-year low was -7.66 on January 26.

Volume GOOG traded a mere 2.3M on Friday, October 29, same as last Friday, October 22, after an incredible 14.8M shares on Friday, October 15, 2010, a YTD and multi-year high. The 20 day moving average has leveled off at approximately 3.9M. By comparison, the 50 day sma is approximately 3.1M. Buyer conviction at the current price and enthusiasm after the earnings report is waning.

Long-Term Trend The 10 month exponential moving average of 517.78 is a long-term indicator and shown on the monthly chart below. That is the line in the sand, so to speak, for the long-term signal of a bull or bear market. GOOG rallied above this indicator in September and has stayed above in October. GOOG had been mostly below this long term bear signal from April to August.

Conclusion On October 14, Google reported excellent Q3 earnings which are reviewed on the Google Financial Performance page Google is still an extraordinary cash flow machine! GOOG had rallied with the market and actually outperformed the market during September and October - even before the excellent Q3 earnings announcement. Google has set the bar high for the future and EPS growth. The intermediate-term trend is bullish and the long-term trend is bullish.

Google Monthly Chart
Up +138% and +$356.26 from November 28, 2008 cyclical closing low of $257.44!

Below is the monthly GOOG chart since the November 2008 cyclical low. The overall analysis and commentary is the same as for the daily chart above. The current price, the yellow horizontal lines, and the yellow uptrend and downtrend lines are the same, and as described, on the daily chart above. The white moving average line is the 10 month exponential moving average of 517.78, which is the long-term bull or bear market signal. GOOG rallied above 10m ema in September 2010 and the current close of.613.70 continues above, indicating a long term bull market.

We are long GOOG.

About Google

Google market capitalization is now 5th largest (up from #7 last week0 in USA at $195.59B, behind #1 Exxon $338.55B and #2 Apple $276.09B. Google is the 3rd largest technology company in USA by market capitalization behind Apple and Microsoft. Just in the past weeks, Google was 13th largest overall company and 4th largest technology company by market capitalization, until the spectacular rally on excellent Q3 earnings. Current Google financial data is at the Google Financial Performance page. Headcount: On a worldwide basis, Google employed 23,331 full-time employees as of September 30, 2010, up from 21,805 full-time employees as of June 30, 2010.

Google describes itself in press releases as, "Google's innovative search technologies connect millions of people around the world with information every day. Founded in 1998 by Stanford Ph.D. students Larry Page and Sergey Brin, Google today is a top web property in all major global markets. Google's targeted advertising program provides businesses of all sizes with measurable results, while enhancing the overall web experience for users. Google is headquartered in Silicon Valley with offices throughout the Americas, Europe and Asia."

Google's Mission Statement: "Google's mission is to organize the world's information and make it universally accessible and useful. The first step toward fulfilling that mission came when our founders, Larry Page and Sergey Brin, working out of a Stanford University dorm room, developed a new approach to online search that quickly spread to information seekers around the globe. Google is now widely recognized as the world's largest search engine -- a free service whose utility and ease of use have made it one of the world's best-known brands almost entirely through word of mouth from satisfied users."

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